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Red Cross Wonder Woman?

January 24, 1999

Government: Presidential Prospects

Red Cross Wonder Woman?

Elizabeth Dole's PR machine vs. reality

It was vintage Elizabeth Dole. A day before announcing her resignation as president of the American Red Cross, aides leaked word that she was weighing a Presidential bid. Naturally, camera crews and a crowd of cheering employees were on hand as Dole turned her valedictory into a media event. "We have never been in better financial health," she said in her soft North Carolina drawl. "The Red Cross is solid as a rock."

It is crucial for Dole, 62, perhaps the Republican Party's best-known woman, to trumpet her experience as head of the $2 billion Red Cross and two Cabinet departments. She has never held elective office, so she needs to establish her bona fides as a top executive before she jumps into the race.

But just how good a manager is she? Political adviser Mari Maseng Will insists that Dole's stint at the Red Cross "was nothing short of a transformation," as she turned a troubled charity in-to a streamlined organization. Part of Dole's magic touch: tapping her connections to pull in $3.4 billion since 1991.

Like any proud executive, Dole stresses the sunny side. Reality is more complex. Since 1993, the Red Cross's blood operation has been under a court order, requested by the Food & Drug Administration, to meet rules assuring the purity of its blood supply. And for all Dole's claims to have restored the Red Cross's bottom line, the charity's finances remain rocky. "She's wonderful, she's captivating and charming, but she is not a good manager," says one top Red Cross exec who resigned over Dole's policies. "Her focus is almost 100% on image."RED INK. Among Dole's proudest accomplishments is her record as a fund-raiser. But since fiscal 1990, the year before Dole joined the charity, public support has increased only 10%. The Red Cross took in $520 million in 1990; seven years later, its collections totaled $572 million and fund-raising costs had climbed by 91%. During the same period, expenses grew faster than income. The charity is in the black overall, but the unit that handles blood collection and distribution will show a $35 million loss in fiscal 1998--red ink for the seventh year in a row. The division has run up a $330 million debt.

One reason for the loss is the costly overhaul that the FDA demanded in 1993 when it found that the Red Cross was not moving fast enough to protect the blood supply from deadly infections such as HIV. Brian McDonough, who oversees the blood unit, credits Dole for making the blood supply safer by consolidating testing centers and upgrading information systems. The unit is on track to break even next year, he says. "She has been a significant catalyst to move [us] from the Dark Ages of blood banking to the modern age," he adds.

But Dole, who declined to comment, moved aggressively and alienated many community blood banks. Their complaint: The Red Cross is so intent on expanding its grip on the blood supply that it has forgotten its charitable mission. Indeed, Dole is pushing to boost market share from the current 47% to 60% by 2002 as a way to increase income and put the division back in the pink.CAMPAIGN CRONIES. That could eliminate the locals. "The Red Cross has taken actions that are inconsistent with our organizations' humanitarian mission," says Jim MacPherson, head of America's Blood Centers, a group of community blood centers. "A monopoly of the blood supply is not in the best interest of anyone."

In late 1997, Dole signed an exclusive contract with V.I. Technologies in Melville, N.Y.--and gave it a $3 million loan interest-free for three years. The Red Cross also agreed to pay V.I. to clean a certain amount of blood. In return, it obtained a market advantage over rival blood banks because it now can offer ultrapure blood--a value-added product that it can sell for about twice the cost of a "regular" unit of blood. V.I.'s blood-purifying technology was coveted by not only the Red Cross and community blood banks but also by the military. Early on, V.I. signaled that it would share its knowhow with everyone. So the exclusive Red Cross agreement brought howls of complaints from competitors--and triggered an ongoing Justice Dept. antitrust investigation.

Critics also take aim at Dole's tendency to name major GOP donors to the Red Cross board. Four of the 11 at-large governors gave the maximum allowable to the Bob Dole Presidential campaign; seven board members and their corporations gave nearly $900,000 to Republicans during the 1996 campaign cycle. Among the donors was D. Inez Andreas, wife of Bob Dole chum Dwayne O. Andreas, ex-CEO of Archer Daniels Midland Co. Andreas interests gave more than $3 million to the Red Cross after Dole took the helm and more than $400,000 to the GOP in 1995-96. While a senator, Bob Dole had championed ethanol tax breaks crucial to ADM's profitability.

In 1996, Dole took leave to stump for her husband. On her return, she hired a handful of top advisers from his campaign as consultants. While they worked on specific projects, some received six-figure fees. A KPMG LLP study later warned that consulting fees were running close to half the total payroll of $926 million. Dole also added two former Bob Dole advisers to her personal staff, including Will, the communications chief for the Dole '96 campaign. Meanwhile, the charity laid off more than 100 rank-and-file staff in 1997 to cut costs.

Is Elizabeth Dole more polished pol than hands-on manager? Over the next year, as Dole weighs a run for the GOP nomination, she'll have plenty of opportunities to convince voters that substance will triumph over style in a Dole Presidency. But she may find it hard to lean on her record at the Red Cross.By Lorraine Woellert, with Paula Dwyer, in Washington